This is really concerning and unfortunately more common than it should be. The CP40 is serious - it's the IRS's final notice before they start seizing assets, so you need to act quickly. First, verify this is legitimate by calling the IRS directly at 1-800-829-1040 (from their official website, not the number on the notice). Have your Social Security number and a copy of your 2021 tax return ready. Most likely what happened is the IRS sent previous notices (CP14, CP501, CP503, CP504) to an incorrect address. This could be due to: - Address changes not properly updated in their system - Mail delivery issues - The IRS using an old address from a previous return Your immediate next steps: 1. File Form 12153 (Request for Collection Due Process Hearing) within 30 days of the notice date. This stops all collection actions while you resolve this. 2. Request your account transcript online at irs.gov or by filing Form 4506-T to see what notices they claim to have sent and when. 3. If you've moved since filing your 2021 return, file Form 8822 to update your address. Don't panic, but don't delay either. The Collection Due Process hearing will give you time to sort this out without worrying about frozen bank accounts or wage garnishment. Many people successfully resolve these situations once they can actually communicate with the IRS.

I had almost the exact same situation happen to me in 2022! Got a CP40 for my 2019 taxes with zero prior notices. Turns out the IRS had been using an address from when I was 19 and living in a dorm, even though I'd been filing with my correct address for years. The key thing that saved me was immediately filing Form 12153 for a Collection Due Process hearing - this bought me time to figure out what went wrong without having my accounts frozen. During the hearing, I was able to prove that I never received the prior notices due to the address mix-up. One thing I learned that might help you: when you call the IRS, specifically ask them to read back ALL the addresses they have associated with your SSN across all years. Sometimes they have multiple addresses in their system and use the wrong one for notices even when your tax returns show the correct current address. Also, definitely get your account transcript ASAP - it'll show you exactly what they think happened and when they claim to have sent each notice. In my case, the transcript clearly showed notices going to an address I hadn't lived at in over 5 years, which made my case much stronger. The whole process took about 4 months to fully resolve, but the Collection Due Process protection meant I could sleep at night while sorting it out. Don't let this stress you out too much - it's fixable, you just need to act quickly on that 30-day deadline for Form 12153.

As someone who works in tax compliance, I'd recommend being very careful about the documentation aspect that others have mentioned. The IRS has been increasingly scrutinizing subscription services claimed as business expenses, especially streaming services that have obvious personal use components. For your Spotify deduction to hold up, you'll need more than just saying "it inspires my work." Document specific instances where songs led to specific client projects. Keep screenshots of work-related playlists. Save client communications that reference the musical elements in your designs. Track your listening time during work hours versus personal time. The "ordinary and necessary" test is crucial here. Ask yourself: would other graphic designers in your industry typically need a music streaming service to perform their work? If the answer isn't a clear yes, you might be stretching the deduction. Also consider the audit risk versus reward. A $120 annual deduction might not be worth the potential hassle if you can't substantiate the business use percentage convincingly. Sometimes it's better to be conservative, especially with expenses that straddle the personal/business line.

I'm a small business owner who went through a similar situation with subscription deductions. One thing I learned that might help you is to think about creating a clear business justification document upfront, not just tracking after the fact. I wrote a one-page memo explaining exactly how my subscriptions connect to revenue generation, then kept it with my tax records. For something like Spotify, you could document your creative process - how you use music discovery for client projects, the time spent researching for specific design themes, and how this differentiates your services from competitors. The key is being proactive rather than reactive. If you can show the IRS that you thoughtfully considered the business purpose before claiming the deduction (not just scrambling to justify it during an audit), it demonstrates good faith compliance. Also consider setting up separate playlists for each client project and taking screenshots. This creates a visual paper trail showing dedicated business use that goes beyond just saying "music inspires me.

I've been dealing with IRS notices for years as a small business owner, and this Form 941 signature verification issue is becoming more common. What's happening is that when you e-file through a third-party service, the IRS sometimes can't verify that YOU (the business owner) actually authorized the filing - even though the service submitted it correctly. The LTR 3463C is actually a good thing - it means the IRS received your forms but just wants confirmation they came from you. This is especially common when you have irregular filing patterns (like only filing one quarter per year). Your brother-in-law should definitely sign and return the declarations, but I'd also recommend he contact his tax service to ask about adding electronic signature authorization for future filings. Many services now offer enhanced e-signature verification that prevents these notices from being generated in the first place. The key thing is not to ignore it - even though there's no penalty mentioned, the IRS could flag future filings if they don't get the verification they're requesting.

This is such a frustrating situation, but unfortunately it's becoming more common with business tax filings. I've seen this exact issue with several clients - the IRS e-filing system accepts the return, but then their verification system flags it for manual signature confirmation later. The fact that your brother-in-law only files for one quarter per year is likely triggering an automated review. The IRS system expects consistent quarterly filings, so when it sees sporadic activity, it generates these verification requests as a fraud prevention measure. My advice would be to sign and return the declarations immediately, but also have him call the IRS business line to clarify his filing status. If he's truly a seasonal employer who only pays wages one quarter per year, he should formally request seasonal employer designation. This will prevent future signature verification notices and make his filing pattern look normal to the IRS system. The good news is that since there's no penalty mentioned in the LTR 3463C, this is purely administrative and won't negatively impact his business tax account once resolved.

Your client needs to understand that attempting to shield ERC funds from a valid $24 million judgment is not only unlikely to succeed, but could expose them to serious legal consequences. As others have mentioned, once ERC funds are received, they become regular business assets subject to collection. Given the size of both the judgment and the expected ERC payment, I'd strongly recommend your client consider a few key points: 1. **Immediate settlement negotiations**: Sofia's suggestion about offering the $8M ERC as settlement for the full judgment is probably their best option. A 33% recovery might be very attractive to the landlord versus the uncertainty of collecting the full amount. 2. **Timing is critical**: If the landlord's attorneys become aware of the incoming ERC funds, they'll likely file for garnishment before the money even reaches your client's accounts. The sooner settlement talks begin, the better. 3. **ERC audit risk**: Dmitry raised an excellent point about IRS scrutiny. An $8M claim will almost certainly trigger an audit, and if the claim is reduced or denied, your client loses their primary settlement leverage while still owing the full judgment. 4. **Asset protection alternatives**: Rather than trying to hide funds (which could constitute contempt of court), explore legitimate options like appealing the judgment or filing for bankruptcy protection if the business truly cannot pay. The reality is that $8M toward a $24M judgment is a significant payment that most creditors would seriously consider, especially given collection uncertainties.

This is a really challenging situation that highlights why having proper legal counsel is so critical when dealing with large judgments and incoming funds. From what I've seen in similar cases, the creditor's ability to intercept ERC funds before they even reach your client's accounts is very real - especially with a judgment this large where the landlord's attorneys are likely being very proactive. One thing I haven't seen mentioned yet is the potential impact on your client's other business operations. If they're still actively running the business, having $8 million suddenly seized or tied up in legal proceedings could create additional operational problems beyond just the judgment itself. I'd also suggest documenting everything about the settlement negotiation attempts. If your client is genuinely trying to work with the landlord to resolve this and the landlord refuses reasonable offers, that could be relevant if there are any future disputes about good faith efforts to satisfy the judgment. The timing pressure here is intense - between potential IRS audits on the ERC claim and the creditor's ability to garnish incoming funds, your client really needs to make some decisive moves quickly rather than hoping they can somehow protect these assets through creative structuring.

Great question! I've been navigating similar territory with my small C-corp (2 employees including myself). One thing I learned that might help is that the IRS has specific safe harbors for certain fringe benefits that make them less likely to be challenged. For example, de minimis benefits (small value items like occasional meals, coffee, office snacks) have a $75 per item threshold and don't require complex documentation. Working condition fringe benefits (like business cell phones, professional subscriptions, work-related education) are also relatively safe if you can demonstrate they're primarily for business use. The key insight my tax advisor shared is that the IRS is more concerned with the overall compensation package being reasonable than with individual fringe benefits. So if your total compensation (salary + benefits) is within industry norms for your role and experience, you're in much safer territory. One practical tip: consider establishing a formal employee handbook that outlines your company's fringe benefit policies, even if you're the only employee. It demonstrates that you're operating as a legitimate business entity rather than just trying to convert personal expenses into business deductions. Have you considered what your total compensation strategy will look like? That might help determine which fringe benefits make the most sense for your situation.

This is exactly the type of question I had when I first incorporated my small business as a C-corp! The good news is that size generally doesn't matter for most fringe benefits - even a one-person C-corp can take advantage of these tax exclusions. However, there are some key compliance considerations you'll want to be aware of: **Business Purpose Requirement**: Benefits like meals need to serve a legitimate business purpose and generally be provided on business premises. You can't just deduct personal grocery bills by running them through the corporation. **Reasonable Compensation**: The IRS scrutinizes small C-corps to ensure that total compensation (salary + benefits) is reasonable for the services provided. They don't want you avoiding payroll taxes by disguising compensation as tax-free benefits. **Documentation**: Keep detailed records showing the business purpose for each benefit. Corporate resolutions establishing benefit policies before implementation can be crucial if you're ever audited. **Non-discrimination Rules**: While these are more relaxed for very small companies, you still can't structure benefits to unfairly favor owner-employees over regular staff. Some of the safest fringe benefits for small C-corps include: health insurance premiums, educational assistance up to $5,250 annually, de minimis benefits under $75 per item, and working condition fringe benefits like business cell phones. The key is treating your C-corp as a legitimate business entity with proper corporate governance, not just a vehicle for personal tax savings. Have you considered consulting with a tax professional who specializes in small business structures? They can help you set up compliant benefit programs from the start.